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Stop Snow Washing C4TF Tells Finance Committee

"Canada needs to create a publicly accessible, centralized, registry of true (e.g., beneficial) owners of companies in an open, searchable format", Canadians for Tax Fairness Executive Director, Dennis Howlett told the House of Commons Finance Committee this week.. "This is key to stopping snow washing as it would serve as a deterrent to criminals and would facilitate access to information for law enforcement, tax authorities, financial institutions, civil society, and journalists", he said.

When criminals and tax evaders use legitimate Canadian investments like real estate to ‘clean’ dirty money, it is called snow washing. Canada has become an international destination for setting up secret companies to “snow wash” illicit funds from all over the world. It is easier to set up a secret company than it is to get a library card! This is because in Canada, the true owners of companies and properties can remain entirely anonymous – their identities can be concealed even from the government agencies entrusted with enforcing laws. This makes it easy for criminals, tax evaders and those financing terrorism to hide and launder money in Canada and makes it hard for law enforcement, tax authorities, and financial institutions to enforce Canada’s existing anti-money laundering and anti-terrorist financing laws.

Howlett made a number of recommendations on how the government could improve its anti-money laundering regime at hearings on the Statutory Review of the Proceeds of Crime and Terrorist Financing Act. These included:

Gaping holes in our Anti-money laundering regime need to be closed. While banks and financial institutions are required to determine beneficial owners and track financial transactions over $10,000, real estate agents, lawyers and other high risk sectors are not required to do this. Money laundering in Vancouver and Toronto real estate markets are a huge problem that is not being properly addressed in large part due to this gap. The BC government has taken a big step forward by requiring beneficial ownership information to be collected by their land registry. Other jurisdictions need to introduce similar measures if money laundering through real estate sector is to be addressed.

We need a public registry of beneficial owners of corporations and trusts. This would make it much easier for tax authorities and law enforcement to go after criminals. And it would make it much easier for financial institutions to fulfill their duty to check on beneficial owners. A public registry would be necessary if the AML/ATF regime were extended to real estate agents, lawyers and other high risk sectors, as it should.

If Canada is to become a leader, rather than a laggard on beneficial ownership transparency and fighting money laundering, we need to match the UK and EU standard of a public registry of beneficial ownership of corporations and trusts.

Howlett also said that the agreement reached with provincial and territorial governments last December to require corporations to know who their beneficial owners are is not much of a step forward.

"When you stop and think about it you will realize that what has been agreed to is really a bit of a joke. Law enforcement would have to ask the company they are investigating for information on beneficial ownership, thus tipping them off that they are under investigation and giving them opportunities to cover their tracks. If they do not voluntarily provide that info then law enforcement authorities have to go through the process of getting a search warrant, further delaying and complicating investigation efforts. The fact that they are not required to report their beneficial ownership information to provincial, territorial or federal corporate registries, means that it is almost impossible to know if companies are identifying their beneficial owners and the information is not easily accessed by law enforcement and there are no penalties for not reporting or reporting false information," he said.